How are Category Management and Spend Under Management Related?

Published: October 30, 2019

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Do you know how Category Management and Spend Under Management will impact you and how GovWin can help?

What is Category Management (CM)?

Category Management is an established initiative led by the Office of Management and Budget (OMB) and the Category Management Leadership Council (CLMC) - the governing body that makes decisions about the CM Initiative, chaired by the Administrator of Federal Procurement Policy, with representatives from DOD, Energy, HHS, DHS, VA, GSA, NASA, and SBA.

OMB’s and the CLMC’s objective was to identify core categories of federal spending, and for each category:

  • develop heightened levels of expertise,
  • share best practices,
  • provide streamlined solutions, and
  • manage supply and demand.

The CLMC and OMB analyzed FPDS data and defined 19 spend categories that were split into ten Common Spend Categories and nine Defense-Centric Spend Categories.

What is the End Goal of CM?

To deliver more savings, value, and efficiency for Federal agencies, while eliminating unnecessary contract redundancies, and meeting the government’s small business goals.

Learn more about CM HERE.

How are Category Management and Spend Under Management Related?

Spend Under Management (SUM) is the percentage of an organization’s spend that is actively managed according to Category Management principles. SUM is calculated based on where the obligation transaction has an applicable business tier of or Best-in-Class (BIC) / Tier 3, Tier 2, or Tier 1/ Tier 1-SB. The tiers are defined as:

Tier 3: Best-in-Class Solutions – Best-in-class (BIC) is a government-wide acquisition designation for contracts and vehicles that can be used by multiple agencies and that satisfy these five key criteria defined by the White House Office of Management and Budget:

  1. Rigorous requirements definitions and planning processes
  2. Appropriate pricing strategies
  3. Data-driven strategies to change buying and consumption behavior (i.e., demand management)
  4. Category and performance management strategies
  5. Independently validated reviews

Tier 2: Multi-Agency Solutions – multi-agency contracts that satisfy rigorous standards set for leadership, strategy, data, tools, and metrics.

Tier 1: Mandatory-Use Agency-Wide Solutions –agency-wide contracts with mandatory-use or mandatory-consideration policies, along with standards set for data-sharing and other criteria.

Tier 0, Spend NOT Aligned to Category Management Principles:–contracts that do not fit into one of the three tiers above. Agencies are encouraged to analyze Tier 0 spend to find opportunities for shifting to higher-tiered acquisition solutions.  Click  HERE to learn more about SUM Tiers.

To capitalize on efficiencies and cost savings, a government-wide FY 2019 goal has been established to bring the total SUM to 55% of total baseline obligations, a $17.5 billion increase over the FY 2018 goal.

Agencies are encouraged to move their spend onto contracts that have been designated with a tier.

Why Do SUM Tiers Matter?

Agencies are being required to operate more efficiently and realize more savings. Agencies are encouraged to analyze Tier 0 spend to find opportunities for shifting to higher-tiered acquisition solutions.

Best-in-Class (BIC) vehicles include terms and conditions, data collection and reporting requirements that reduce administrative burdens and costs, drive greater transparency, standardize and provide data and analytics to inform business decisions, and begin to eliminate practices that dilute or reduce the Government’s purchasing power.” – Acquisition Gateway, BIC FAQs

The government requires agencies to submit monthly Contract Inventory updates with updated Tier assignment for contracts being used. This data is then used to calculate the government-wide SUM to assess goal achievement and cost savings.

How Can GovWin Help?

Contractors may have one or more of these concerns:

  • Fewer opportunities in the space for both small and large firms
  • Reduced visibility into opportunities
  • Lack of visibility into which contracts fall under each tier

The GovWin Category Management Tier captures the government SUM Tier and relates it to the data to GovWin content where possible in Tracked Opportunities, Contract Awards, and Federal Spending Analytics (FSA).

With Federal Opportunities, clients can develop their business pipeline by locating Tier rated opportunities with a greater chance of re-competes and/or on-ramps. They can also improve bid/no-bid decision making by identifying opportunities at risk for consolidation or cancelation because the opportunity is under a Tier 0 contract. Clients can also make informed subbing decisions through contract category identification.

With Federal Contract Awards and Federal Spending Analytics, clients can research top vendors on the BIC and higher tier contracts; monitor agency contract spending trends on the tier-assigned contracts; and identify contracts at risk for not being re-competed.